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July 12, 2011

NAIFA Survey: Clients Nearing Retirement Want Risk Protection

Survey of NAIFA members also found they oppose a fiduciary duty for brokers

The National Association of Insurance and Financial Advisors (NAIFA) released a survey on Tuesday which found that since the economic meltdown, middle-income clients of advisors have become more interested in products with risk-protection components.

The survey, which polled 914 NAIFA members, found these products to be particularly of interest among investors nearing retirement age. More than eight of 10 advisors surveyed said clients in this group are seeking products that will protect their investment principal in the event of a down market.

The survey also found that seven out of 10 NAIFA members believe a regulation holding registered representatives to a fiduciary standard “would not result in those advisors doing a better job for their clients.”

According to the survey, 84% say clients nearing retirement age are more interested in products with risk-protection components, while 57% say clients under the age of 40 are more interested in those types of products. When asked if the financial crisis has affected the types of products and services their clients are looking for, just 7% said the crisis has had no impact on the investment choices of clients nearing retirement age, while 28% said it has not affected the choices of clients under age 40, NAIFA’s survey found.

"Risk management products like annuities have surged in popularity, particularly among older Americans," said NAIFA President Terry Headley, in a statement announcing the survey results. "Clients are more interested than ever in protecting their nest eggs, ensuring that they can retire when they want and guaranteeing a lifetime income."

The survey also found that about four in 10 advisors (44%) said their typical client nearing retirement age has less than $500 a month to invest. Of clients nearing retirement age, advisors said the following:

35% said these clients typically invest $101-$500 a month.

6% said they typically invest $51-$100 a month.

3% said they typically invest $50 a month.

All told, 71% of NAIFA members said their typical client nearing retirement age invests less than $12,000 in a year (or less than $1,000 per month).

Nearly nine in 10 advisors (86%) said their clients under the age of 40 have less than $500 a month to invest, according to the survey. Of clients under the age of 40, advisors polled in the survey said the following:

50% said these clients typically invest $101-$500 a month.

28% said they typically invest $51-$100 a month.

8% said they typically invest less than $50 a month.

Most advisors (94%) said their typical client under the age of 40 has less than $12,000 a year to invest in their future.

NAIFA has been vocal in its opposition to the Securities and Exchange Commission (SEC) putting brokers under the same fiduciary standard as advisors. "We need to be aware of the impact a universal fiduciary duty would have on our members’ ability to continue to serve the middle market," Headley said in the statement. "Further regulation could increase costs or force more NAIFA members to no longer provide financial products and advice, which would limit the number of consumers who can benefit from our services."

According to the survey, seven out of 10 NAIFA members said a regulation holding registered representatives to a fiduciary standard "would not result in those advisors doing a better job for their clients."

Meanwhile, 70% of NAIFA members said they did not believe clients would abandon advisors working under the suitability standard of care if the clients had a better understanding that those advisors were not bound by a fiduciary duty. An additional 14% said they were not sure.